GAINS On Video: Shortcomings and Pitfalls of Demand Driven Materials Resource Planning (DDMRP) Part 2

In this 2nd Episode of GAINS On, join GAINS Co-founder Bill Benton as he guides supply chain professionals through the shortcomings and pitfalls of Demand Driven Materials Resource Planning (DDMRP).

(00:00): Hello, my name’s Bill Benton. I’m a co-founder here at GAINSystems. Thanks for taking time to join us today. We’ll be talking about DDMRP, that’s an acronym denoting Demand Driven Materials Requirements Planning

(00:33): Particularly in seasonal environments, but even just with general variability across time. There’s gonna be times where you need to pre-build to avoid having less than needed to capacity in the future. One of GAINS’ practitioners, for example, has over 50% of their demand in 10% of the year between Thanksgiving and Christmas, they’re a jewelry manufacturer. This type of pre-building, pre-buying, etc., really isn’t feasible in the DDMRP construct. Some demands are large project based demands. These are things that are known in advance, are large increments, which will increase variability unless they’re recognized and filtered as one-off events that are scheduled in advance. And secondly, there are things like outliers, one-time exports selling off excess, you know, at a low price. These are things where you don’t want to plan more inventory just because you have these one-off events that you can see as outliers and/or filter as incremental scheduled demands. So that’s the first.

(01:39): Secondly there are simple things that cause variance that can be managed like seasonality. So in a DDMRP environment, fluctuations across the year are seen as variability, no different from gaining and losing customers in many cases, new product launches, right? So that can be seen as not a step function upward because you’ve now adding a new way of new products that might use the same componentry as existing products, but seen as another false source of variability. And then of course, things like promotions. All of these things can be managed, recognized, and filtered out so that you understand that these aren’t random variability that require costly management methods or working capital investments, but things that can be dissected and managed. Now, that said, you do need to manage around that core variability that can’t be managed and discerning between the two is essential.

(02:37): Prioritizing given scarcity. So if you’re trying to fulfill as much demand is feasible where you can’t fulfill all the demands and you have to make decisions about which components cure or produce or which items to expedite for distribution or sales order. Understanding the interdependencies between items that go into a same bill material or interdependencies between items on the same sort of perspective sales order isn’t at all managed by DDMRP. So again, that’s, that would be a large manual effort to say, I have these shortages. How do I combine shortages of these items across other items in a BOM or bill of distribution or bill of sale into a complete perfect order. I want to thank you for your time today and would love to chat further about all of these topics. Thank you.